Li Auto, "hunted down" by Huawei and Xiaomi, has seen a significant drop in revenue and fallen back into losses.

To win in the second half of the "fierce competition," Li Auto must upgrade its core capabilities and find new paths to win in higher - dimensional competition.

1

Over the past year or so, the values of many Chinese technology companies have been re - evaluated. Whether it's Tencent and Alibaba in the Internet industry or XPeng and NIO in the new energy vehicle industry, their stock prices have risen significantly. However, Li Auto's stock price has been sluggish in the past year.

Public data shows that Li Auto's current stock price is $18.43 per share, a decline of more than 50% compared to the price of $46.44 per share a year ago. Behind the stock price, on the one hand, it reflects the current performance of the listed company, and on the other hand, it reflects the market's expectations for the company's future performance.

According to the latest financial report for the third quarter of 2025, Li Auto's revenue in this quarter was 27.36 billion yuan, a year - on - year decline of 36.17%. The net profit plummeted, resulting in a loss of 624 million yuan. Behind the significant decline in revenue and the plunge into losses, on the one hand, the sales of Li Auto's four extended - range models, L6, L7, L8, and L9, have dropped significantly. On the other hand, the sales of its three pure - electric models, i6, i8, and MEGA, have fallen short of expectations.

The latest sales data for October released by Autohome shows that the monthly sales of Li Auto's seven core models, including L6, i6, i8, L7, L8, L9, and MEGA, are only 9,680 units, 5,775 units, 5,749 units, 4,347 units, 2,183 units, 2,130 units, and 1,903 units respectively, none of which exceed 10,000 units.

Meanwhile, the sales of Xiaomi Auto, Huawei Hongmeng Zhixing, and NIO, whose product positioning is similar to Li Auto, have been rising rapidly, with many hit products. Among them, the monthly sales of Xiaomi Auto's YU7 and SU7 are as high as 33,662 units and 14,992 units respectively. The monthly sales of Huawei Hongmeng Zhixing's Wenjie M8, Wenjie M7, Zhijie R7, and Wenjie M9 are 17,487 units, 16,071 units, 8,944 units, and 8,010 units respectively. Even NIO is catching up, with the monthly sales of its two large SUV models, LeDao L90 and ES8, reaching 11,722 units and 6,703 units respectively. These models have eroded a significant market share of Li Auto.

2

Before facing the current growth pressure, Li Auto was actually the most successful company among China's new - energy vehicle startups for a long time. It not only launched a series of hit models but also achieved large - scale profitability ahead of others. There are mainly three core factors contributing to its success.

First of all, instead of simply following Tesla's pure - electric route, Li Auto pragmatically chose the extended - range hybrid route, which combines gasoline and electricity. This has enabled it to attract a wider range of users. Facts have proven that currently, except for Tesla and BYD, no other pure - electric vehicle company has achieved large - scale sales. The reason why NIO and XPeng have gradually fallen behind Li Auto is largely because they have overly focused on the relatively small - scale pure - electric vehicle market.

Secondly, Li Auto successfully avoided the most fiercely competitive mid - size and compact car markets and instead targeted the mid - large and large SUV markets. In the past, these two markets were mainly monopolized by three luxury brands, BBA (BMW, Mercedes - Benz, and Audi). Although there was considerable market demand, the high prices of BBA models deterred many consumers. Li Auto launched three mid - large SUV models, L6, L7, and L8, and one full - size large SUV model, L9, at less than half the price of BBA models, successfully attracting consumers who like large - space vehicles but were previously discouraged by the high prices.

Thirdly, Li Auto has shown good product strength in details such as the appearance, interior, and configuration of its products. For example, the trend of large TVs and comfortable sofas in the new - energy vehicle field was initiated by Li Auto.

These three factors have enabled Li Auto to create a series of hit models, including Li ONE and the L - series. Thanks to the success of these products, Li Auto's sales, revenue, profit, and market value have all soared, allowing it to overtake NIO and XPeng and become the most popular new - energy vehicle startup in China. However, as two other powerful technology giants have gradually started to overlap with Li Auto in terms of products, this has significantly hindered Li Auto's growth momentum. One is Huawei, and the other is Xiaomi.

3

It was Huawei that first brought huge pressure to Li Auto.

In mid - 2023, Li Xiang, the founder of Li Auto, publicly mentioned on Weibo that Huawei had caused trouble for Li Auto. He said, "In the third quarter of 2022, the launch and marketing of the Wenjie M7 completely defeated the Li ONE. We had never encountered such a strong opponent before, and we were helpless for a long time." Li Xiang also said, "Huawei's super - strong capabilities directly led to the collapse of Li ONE's sales and its early discontinuation. We lost more than one billion yuan in a single quarter, and the team was severely affected. Many front - line product experts even left the company."

The M7 is the second model launched by the Wenjie brand, jointly developed by Huawei and SERES. It was launched in July 2022, with a starting price of 319,800 yuan, 30,000 yuan lower than the Li ONE at that time, directly halving the sales of the Li ONE. Subsequently, Li Auto decided to learn from Huawei comprehensively. Li Xiang said, "Each member of our management team has bought no less than ten publicly available books about Huawei. We were surprised to find that the painful problems we encountered in product R & D, sales and service, supply and manufacturing, and organizational finance had been solved by Huawei more than a decade ago, or even two decades ago. We must learn! Learn! Learn!"

In order to deal with the Wenjie M7, Li Auto discontinued the Li ONE product line ahead of schedule and then launched three new products, L7, L8, and L9, which led to a rapid recovery in sales. Li Auto even became the most eye - catching dark horse in the Chinese automotive market in 2023. However, Li Auto did not expect that the situation in 2022, when it was severely beaten by Huawei, would repeat itself in 2024.

At the end of 2023, Wenjie launched a new version of the M7 with a more aggressive pricing strategy. The starting price was 249,800 yuan, 70,000 yuan lower than the Li L7 in the same class. This led to another surge in the sales of the M7, which quickly surpassed that of the Li L7.

In addition to completely overtaking Li Auto in the mid - large SUV market, the Wenjie brand has also brought huge pressure to Li Auto in the large SUV market. Before the launch of the Wenjie M9, the Li L9 had been the top - selling model in the Chinese large SUV market. However, after the launch of the Wenjie M9, which is a direct competitor to the L9, the sales of the Li L9 began to decline rapidly, and the Wenjie M9 successfully became the champion in the Chinese large SUV market.

After the sales of Li Auto's two main models, L7 and L9, were successively suppressed, Li Auto launched the smaller L6. With a starting price of only 249,800 yuan, the L6 significantly lowered the purchase threshold for consumers, quickly becoming one of the most successful hit models in the industry, with monthly sales exceeding 20,000 units for several consecutive months. However, this situation did not last long. Huawei Hongmeng Zhixing launched the Zhijie R7, a direct competitor to the Li L6, putting pressure on Li Auto again. For example, in October, the sales of the Li L6 were 9,680 units, while the sales of the Zhijie R7 were 8,944 units, a very small difference.

In the second half of 2025, the Wenjie brand under Huawei Hongmeng Zhixing launched a new mid - large SUV model, the Wenjie M8. It not only competes directly with the Li L8 but also affects the sales of the Li L9 upwards and the L7 and L6 downwards. As a result, all four core models of Li Auto, L6, L7, L8, and L9, have been suppressed by the models under Huawei Hongmeng Zhixing. One can imagine Li Auto's helplessness.

Due to the increasing pressure from Huawei in the extended - range vehicle market, Li Auto has gradually started to increase its layout in the pure - electric vehicle field. However, in the pure - electric field, Li Auto does not have a first - mover advantage. On the one hand, it has to face established players such as Tesla, NIO, and XPeng, which have long been focused on the pure - electric vehicle market. On the other hand, it has to deal with the challenges from the new entrant, Xiaomi Auto.

From the market data, to a certain extent, Xiaomi Auto is the main reason for Li Auto's poor performance in the pure - electric vehicle market. The market for mid - to - high - end pure - electric vehicles priced above 200,000 yuan is limited. Just the two models of Xiaomi Auto, SU7 and YU7, have snatched more than 40,000 units of monthly sales, leaving very little room for Li Auto's i8 and i6. The loss of market share in the extended - range vehicle market and the poor progress in the pure - electric vehicle market have led to a significant decline in Li Auto's performance in the third quarter.

4

Objectively speaking, Li Auto has excellent product - definition capabilities and product strength, which is something that Li Xiang, the founder of Li Auto, is quite confident about. Whether it was the early L - series extended - range models or the current i - series pure - electric models, they have all brought some new ideas to the highly homogeneous Chinese new - energy vehicle industry.

However, in today's industry, a slightly leading product - definition ability is no longer sufficient to win the competition. More differentiated core capabilities are needed. For example, having cost advantages brought by an integrated supply chain like BYD or leading advantages in key technological fields such as intelligent driving and intelligent cockpits like Huawei. Otherwise, it will be difficult to win when facing competitors like Xiaomi Auto, which has a more stylish appearance and more obvious cost - performance advantages.

Currently, the remaining companies in the Chinese new - energy vehicle industry are all quite powerful. Some are traditional automotive giants such as Geely, Chery, and Great Wall Motors, which have gradually adapted to the competition in the new - energy vehicle market. Some are new - energy vehicle startups with their own characteristics, such as Huawei Hongmeng Zhixing, Xiaomi, Leapmotor, NIO, and XPeng. Others are foreign automotive companies such as Volkswagen, Mercedes - Benz, BMW, Toyota, and Honda, which are accelerating to make up for their shortcomings in the new - energy field. In addition, there are BYD and Tesla, the two global leaders in the new - energy vehicle industry. Each company is ambitious and will continue to launch a series of highly competitive products.

Facing the above - mentioned competitive environment, Li Auto will face huge pressure in the long run. However, business competition is so cruel that the stronger the opponents become as the competition progresses, and the more intense the competition will be. In the first half of the competition, Li Auto obtained an entry ticket to the second half with its excellent product - definition ability. To win in the second - half "fierce competition" among powerful players, Li Auto must upgrade its core capabilities and find new paths to win in higher - dimensional competition. This will be an important test for Li Auto in the future.

This article is from the WeChat official account "Lishi Business Review" (ID: libusiness). Author: Lishi, Editor: Pingfan. Republished by 36Kr with permission.